Why a delivery challan exists
Under Section 31 of the CGST Act, a tax invoice for goods is issued before or at the time of removal. But goods often leave a godown when there is no sale yet, or when the exact quantity sold is not known. Rule 55 covers these movements: the consignor issues a delivery challan in lieu of an invoice at the time of removal, and an invoice follows later if and when a supply takes place.
When you can use a delivery challan
Rule 55(1) lists four cases:
- Liquid gas where the quantity at the time of removal from the supplier's place of business is not known.
- Transportation of goods for job work. Rule 45 adds that inputs, semi-finished goods and capital goods sent to a job worker must travel under a challan issued by the principal, with the Rule 55 details. See job work under GST and ITC-04.
- Transportation for reasons other than by way of supply. The movement itself is not a sale.
- Other supplies notified by the Board.
Two further situations are covered by the rest of the rule and by CBIC clarifications:
- Supply on approval basis. CBIC Circular 10/10/2017-GST clarifies that goods taken for supply on approval can be moved within a State or to another State on a delivery challan, with an e-way bill where applicable, and the invoice issued at the time of delivery once the buyer approves. The circular applies to all goods supplied in similar situations, and where goods are carried to another State and supplied there, the supply is inter-State and attracts IGST.
- Goods in batches, lots, or semi or completely knocked down condition. Under Rule 55(5), the supplier issues the complete invoice before the first consignment, a delivery challan referring to the invoice for each later consignment, sends each consignment with its challan and a certified copy of the invoice, and sends the original invoice with the last consignment.
Where goods are moving for supply to the recipient but the invoice could not be issued at removal, Rule 55(4) requires the supplier to issue the tax invoice after delivery.
What a delivery challan must contain
The challan is serially numbered, up to 16 characters, in one or more series. Rule 55(1) lists the details it must show:
| Detail | Notes |
|---|---|
| Date and number of the challan | Serial number up to 16 characters |
| Consignor's name, address and GSTIN | GSTIN if registered |
| Consignee's name, address and GSTIN or UIN | GSTIN or UIN if registered |
| HSN code and description of goods | Every challan |
| Quantity | Provisional where the exact quantity being supplied is not known |
| Taxable value | Every challan |
| Tax rate and amount: CGST, SGST or UTGST, IGST, cess | Only where the transport is for supply to the consignee |
| Place of supply | For inter-State movement |
| Signature | Every challan |
Note the tax fields: a challan for job work or for a movement that is not a supply carries the taxable value but not a tax charge, while a challan for goods going to a buyer, such as liquid gas or a later lot of a knocked-down consignment, shows the tax. For how the tax lines are chosen, see CGST, SGST and IGST.
Copies
Rule 55(2) requires a delivery challan for goods to be prepared in triplicate:
- Original: ORIGINAL FOR CONSIGNEE
- Duplicate: DUPLICATE FOR TRANSPORTER
- Triplicate: TRIPLICATE FOR CONSIGNER
This mirrors the three copies of a tax invoice for goods under Rule 48. See GST invoice format.
E-way bills for goods on a challan
Rule 55(3) says that where goods are transported on a delivery challan in lieu of an invoice, the movement must be declared as specified in Rule 138, the e-way bill rule. A challan does not take a movement outside the e-way bill system; check whether Rule 138 requires an e-way bill for the consignment, as you would for an invoice.
Challans that come back from a job worker
Goods returning from a job worker, or moving on from one job worker to another, also need a document. Under Rule 45(1), the challan for goods sent from one job worker to another can be issued by the principal or by the sending job worker. The principal's original challan can also be endorsed by the job worker with the quantity and description of goods sent on or returned, and each later job worker can endorse it again. These challans are what the principal later reports in ITC-04.
Delivery challan or tax invoice: a quick test
| Situation | Document at removal |
|---|---|
| Goods sold and dispatched to the buyer | Tax invoice |
| Inputs or capital goods sent to a job worker | Delivery challan (Rules 45 and 55) |
| Goods taken to a customer on approval | Delivery challan, invoice when the buyer approves |
| Liquid gas where the quantity is not known at removal | Delivery challan |
| Machine shipped knocked down in several lots | Full invoice before the first lot, then a challan with each lot |
| Goods moved for a reason other than supply | Delivery challan |
Keeping challans under control
A challan is only half a transaction. Goods sent on approval must be invoiced or returned: under Section 31(7) the invoice is due at the time of supply or six months from removal, whichever is earlier. Goods sent for job work must come back within the time limits in Section 143, or they are treated as supplied. In practice that means keeping a register of open challans, what has come back against each, and which ones are getting old.
- CGST Rules, Rule 55: Transportation of goods without issue of invoice (CBIC)
- CGST Rules, Rule 45: Inputs and capital goods sent to the job worker (CBIC)
- CBIC Circular 10/10/2017-GST: Movement of goods on approval basis (GST Council)
- CGST Act, Section 31: Tax invoice (CBIC)
- CGST Act, Section 143: Job work procedure (CBIC)
- CGST Rules, Rule 48: Manner of issuing invoice (CBIC)
This guide explains the rules in general terms. It is not tax advice: check the current notifications or ask your CA before you rely on it for a filing.